If you’re a customer, when you pay $8 for a bowl of beef pho, what are you really getting?

And if you’re a pho restaurant operator, do you know your food cost and profit margin?

Let’s get on a spreadsheet and take a look at a typical beef pho recipe. There are many ways to do this calculation, depending on your preference and business setup. What I’m presenting here is one of the simpler methods for illustration purpose. Also ingredient prices fluctuate regularly, but the concept is valid and should give you a decent result.

There are 3 tables below. The first one aims to calculate the broth cost only, the result of which is cost of broth per regular bowl of serving. The second shows calculation for a typical serving, including the banh pho noodle, toppings and garnishes, but specifically excluding any protein toppings. And the third table costs out each portion to include various protein toppings like sliced rare eye of round, tendon, tripe and beef balls.

The first table is the Cost of Broth Per Bowl Calculation, which shows the cost of broth for a typical Regular size bowl requiring about 30 FL-OZ of broth. Many restaurants use much larger pot sizes, but for simplicity I’m using a more manageable pot size to yield 21 gallons. The broth cost per bowl comes out to about $1.36. This is how much your broth for each regular bowl costs.

COST OF BROTH PER BOWL

Ingredients From Recipe

Recipe Quantity

Recipe UM*

Vendor Price

Vendor UM*

Recipe Component Cost

Water

21

GAL

$0.00

GAL

$0.00

Beef knuckle bones

25

LB

$0.79

LB

$19.75

Beef Brisket

20

LB

$4.59

LB

$91.80

Salt

1.81

LB

$0.15

LB

$0.27

Fish Sauce

2

FL-OZ

$1.60

BOTTLE

$0.19

Rock Sugar

0.14

LB

$1.44

LB

$0.20

Star Anise (Đại Hồi)

0.1

LB

$3.00

LB

$0.30

Cinnamon (Vỏ Quế)

0.3

LB

$2.00

LB

$0.60

Cardamom (Thảo quả)

0.1

LB

$36.00

LB

$3.60

Cloves (Đinh Hương)

0.2

LB

$2.00

LB

$0.40

Yellow onion

3

LB

$0.50

LB

$1.50

Shallot

1

LB

$2.00

LB

$2.00

Ginger

1

LB

$1.05

LB

$1.05

BATCH COST =

$121.67

*UM = Unit of measure

GALLONS YIELD =

21

** Assume a typical Regular size bowl (30 FL-OZ)

NUMBER OF BOWLS** YIELD =

89.6

BROTH COST PER BOWL =

$1.36

The next table displays the Cost Per Assembled Bowl Calculation-Without Protein Toppings, which shows the cost of the same regular bowl with properly portioned banh pho noodle, onion garnish and broth. It also includes one portion of the garnish (bean sprouts, lime, chili pepper, and Thai basil) that is typically served on the side plate. The cost of the bowl is now increased to $2.22. Note that this is for costing purpose only; operationally you would add other proteins and ingredients over the banh pho before adding the broth last.

COST PER ASSEMBLED BOWL-WITHOUT PROTEIN TOPPINGS

Ingredients From Recipe

Recipe Quantity

Recipe UM*

Vendor Price

Vendor UM*

Recipe Component Cost

Banh pho

5

OZ-WT

$1.10

LB

$0.34

Green onion

1

OZ-WT

$0.70

BUNCH

$0.14

Yellow onion

2

OZ-WT

$0.50

LB

$0.06

Cilantro

3

OZ-WT

$0.40

BUNCH

$0.08

Bean sprout

2.8

OZ-WT

$0.60

LB

$0.11

Basil

1

STALK

$12.00

LB

$0.10

Lime

1

WEDGE

$2.25

LB

$0.02

Jalapeno

0.2

OZ-WT

$1.40

LB

$0..2

Broth

30

FL-OZ

$1.36

*UM = Unit of measure

COST PER ASSEMBLED BOWL-NO PROTEINS =

$2.22

Now that you have the basic regular sized pho costed out, it’s time to add a few protein toppings to get the final food cost of a regular beef pho bowl. I’ve included examples of rare beef (tái), tripe, tendon, and beef balls here, as well as the well-done brisket. Note that, because the brisket cost was included in the broth calculation already, adding well-done brisket to a bowl should not add brisket cost a second time. The cost of the bowl now ranges from $2.20 to $3.68.

COST PER COMPLETE BEEF PHO BOWL FOR VARIOUS PROTEIN TOPPINGS

Ingredients From Recipe

Recipe Quantity

Recipe UM*

Vendor Price

Vendor UM*

Recipe Component Cost

Beef tái

3

OZ-WT

$2.60

LB

$0.49

Tripe

3

OZ-WT

$3.00

LB

$0.56

Tendon

3

OZ-WT

$2.20

LB

$0.41

Beef balls

4

OZ-WT

$3.70

LB

$0.93

COST PER BOWL-Pho Tai =

$2.70

COST PER BOWL-Pho Tai + Tendon + Tripe =

$3.68

COST PER BOWL-Pho Beefballs =

$3.14

COST PER BOWL-Pho Brisket =

$2.22

COST PER BOWL-Tai + Brisket + Tendon + Tripe =

$3.68

What’s shown above are normally considered “food cost” in foodservice industry. Labor costs can also be calculated to show a more accurate cost of a bowl of pho.

If you’re eating at a pho restaurant that charges $8 per regular Special bowl (tái + brisket + tendon + tripe), then you can estimate that restaurant’s food cost for the Special bowl is about ($3.68/$8) = 46%. I use typical retail prices in these calculations, and $3.68 is a great deal for home cooking.

For a restaurant business, food cost should be below 30%. A restaurant has its own wholesale price list from its suppliers, and prices vary widely depending on location. Furthermore, a conscientious restaurateur have many ways to optimize operation to minimize costs without compromising quality and service. The net result is lower food cost which can increase profit margins.

Just as a counterpoint, there are pho restaurant owners who will skim costs to make a buck at the expense of the customers. They may do the following:

Adjusting recipes (ingredients, procedure, and cook time)

Using lower quality/lower cost ingredients

Employing less qualified/untrained staff

There is nothing wrong with doing these in and of themselves; the owner has every right to run his business any way he wants as long as it’s not illegal. But this is why pho quality can vary greatly from one pho restaurant to another.

People love to enjoy good foods and actually don’t mind paying for a great bowl of pho and a satisfying experience. The fact is, busy pho restaurants (which most of the time equates to serving good pho) have developed their own procedure to maintain quality and control both food and labor costs. They know how to provide good customer service to attract repeat business. As a result, they charge fair prices for great pho and great dining experience.

In the end, what does this all mean? Well, regardless of how much the bowl of beef pho is charged to a customer, a smart customer can find very good pho at very decent price, and the pho restaurant owner can make good profits knowing his accurate costs.

If you’re a pho customer, be wary of the cheap pho. Those half-priced pho or even those in the range of $5 to $6 may become real expensive pho if you’re not getting the quality and service expected. It’s better to pay a few dollars more to support pho shops that care to serve good pho using good ingredients, employ and pay a well-trained staff, and charge a fair price for it. Those are the ones you want to be around for a long time.

If you’re a pho restaurateur, learn how to calculate your food costs properly, then learn to control then maintain both quality and cost of your pho. This care will show in the pho that you serve, and will definitely show in your bottom line. Doing so will also ensure you have good margins and your pho restaurant will be around for a long time.

]]>http://www.lovingpho.com/vietnamese-pho-restaurants/hey-whats-the-cost-of-that-bowl-of-pho/feed/0http://www.lovingpho.com/vietnamese-pho-restaurants/hey-whats-the-cost-of-that-bowl-of-pho/Signs That a Pho Restaurant Is in the Process of Failinghttp://feedproxy.google.com/~r/LovingPho/~3/9BV5BNubst0/
http://www.lovingpho.com/vietnamese-pho-restaurants/signs-that-a-pho-restaurant-is-in-the-process-of-failing/#commentsSat, 14 Mar 2015 00:32:50 +0000http://www.lovingpho.com/?p=2326

I was recently contacted by a restaurateur to help her pho restaurant. Without taking immediate action to improve business, this pho restaurant will have to close because revenues are not enough to cover expenses.

All the signs are there. Quite clear actually. Even many casual observers can probably see what’s wrong with this pho restaurant. For various reasons, though, it’s never clear to the owner.

Unfortunately, with all my knowledge about pho, about pho business, and about how to properly run a pho restaurant, I couldn’t help the owner.

This is the story of a failing pho restaurant that I tried but could not help. The restaurant has lots of potentials and is in decent location, but sadly it’s probably not going to make it.

Initial Consultation and Observation

I normally have some idea why a pho restaurant may be failing upon initial examination. Beyond that, I don’t jump to quick conclusions. I always go through the consultation and analysis process to make sure all information, data and facts are collected. So what are some initial signs of failures? Here are some:

The restaurant ran a 20% off grand-opening special that lasted for 2 months.

The owner thinks her pho is rated 8-9 out of 10, yet the dining room is always empty.

This pho restaurant charges 10-20% more compared to many pho restaurants within 3-4 blocks.

The menu has numerous items, too confusing for first time visitors and more than half the items don’t sell regularly.

The restaurant name, ambiance and service are neither welcoming nor inviting.

The owner does not know how much labor or food costs her restaurant is incurring.

This was just the start. There were many more issues that surfaced upon further examination.

Symptoms of a Poorly Run Pho Restaurant

It’s not like the owner did not know what was wrong with her restaurant. Of course she had to know. All the symptoms were there, very clear. In any case, I tried to help her see them and take proper action to rectify.

The 20% off grand-opening special lasted for 2 months. Right after it ended, business dropped drastically.

The kitchen is unorganized, inventory not done regularly, and signs of cross contamination abound.

The staff seems competent, but the leadership is lacking. Her husband who has a full-time job elsewhere, helps in the evening and weekends. And he does whatever he feels like, in his own way.

The owner makes less than good basic business decisions. An example is staying open past 10PM so they can serve one or two “regular” customers a few times a week.

Aside from a Facebook page that really does nothing and a Yelp page with one review, there is not much marketing or online activity going on.

When I dug a little further into the operation, there were other additional reasons for this pho restaurant to not make it, and the owner agreed that immediate action had to be made for it to survive.

Treatment For the Illness

I immediately set out to work to help this pho restaurant turn around. First order of business involved fixes for multiple areas, including getting organized; learning the basics of restaurant numbers; understanding the food quality, food cost, customer service and staff training problems; then creating a plan and following through with it. At every step of the way, I worked closely with the owner to help her understand all issues involved, understand how to carry out the fixes and their impact on saving her business.

One of the most important things to do first is to properly use the POS (point of sale) system. This includes knowing what the program does, how it collects information, how to analyze and then use the resulting sales figures.

Review all aspects of the menu, including design, menu items (how they are prepared and served), how they are priced, prioritization of what should be and not be on the menu, etc.

Look at a number of online and traditional marketing methods to start connecting with potential customers, get important online presence, build trust in existing customers, and attract new customers.

Create a plan to makeover the brand. This includes making the dining room a comfortable place for diners to want to come and enjoy their meals with friends and families, training the staff to be more knowledgeable in customer service and in the restaurant’s own dishes and ingredients.

These are just a few of the things identified in the plan to fix this ailing restaurant. I created a detailed Gantt chart for all the tasks and their schedules to serve as the roadmap for the owner to follow. For each area, I spend plenty of time walking her through best practices and detail on how they will help turn the pho restaurant around. The schedule called for 4-5 weeks of preparation and a few days to a week to make changes to fix problems and re-open.

The Real Hindrance

While there are other additional shortfalls that this pho restaurant displays, after 2 weeks of work, it was clear that there is only one thing that really matters. This is the one thing I’ve known all along but have hoped that it would not be the case for this rescue project. I knew one thing: Solve it and this pho restaurant is on its way to profitability.

The existing operation needs a lot of changes in many areas, and it needs total commitment from the owner to make those changes.

Only the owner can make the final decision to willingly change to become better. She has to want to change the status quo to start making any profit.

Unfortunately, the owner couldn’t seem to be motivated enough to carry out the changes. There seems to be one reason (excuse) or another why certain thing can’t be done or why information critical to making decision is not available.

After 2 weeks of what seemed like smooth sailing toward fixing the restaurant’s problems, the owner told me she understood all the reasons for following through with the plan, but insisted that the fixes to be done more quickly and without having to go through the work involved.

The Bottom Line

So that’s how far the project went. I could not help this pho restaurant if the owner doesn’t really want to make the changes. This is not the case of quick fix, two-day makeover, or simple cosmetic change. The owner and her restaurant must go through changes at the foundation of the business.

No pho restaurant fails all of a sudden. Either it didn’t start out right to begin with, or it’s a gradual slide to the abyss of no revenue. In almost all cases, there’s always time to make corrective action. In the vast majority of cases, you can watch as if in slow motion that a pho restaurant is going down and will eventually close.

All the signs are there and the solutions are also there. Yet some do pull through but others continue their path to closure. I hope this story helps someone.

Do you have a story to tell about a failing restaurant? Share with us in the comments below.

Hello Mr. pho restaurant owner. Are you aware of how your customers see you, and are you getting the right customer feedback and fix problems so to earn her repeat business?

Good question in today’s social-centric world of competitive marketplace. As I help pho restaurateurs improving performance of their businesses, there’s always a few common threads among those pho restaurants that are in trouble of making it. If I have to boil it down to a few words, it’d be this: “Understand what your customer is unhappy about your pho restaurant, then fix it fast.”

That sounds simple enough. But understanding those few words and carrying out the right corrective action are two different things. The challenge is a lot tougher when the customer doesn’t actually tell you the problem, but she thinks it and she is definitely telling her friends about it. So what is a pho restaurant operator to do?

Here are the 5 toughest challenges a typical pho restaurant faces. If fixed, these 5 will give the best payback potentials for a pho restaurant owner. Here we go.

Pho restaurant thinks its pho is good. If your dining room is not filled during meal times, then this may be one of your problems. You think your pho is real good, but your customers may disagree, and the proof is they don’t come for your pho anymore. You may blame it on the competition or the economy, but is there a chance that your pho is really not that great?

What to do: This one is pretty straightforward to start: ask your customers what they think about your food. A good place to start is a simple survey, then conduct surveys regularly to monitor your progress.

Servers do not provide good service. In general, service is improving a bit with newer pho restaurants opened by a younger generation. But the fact is many Vietnamese restaurants still cannot shake the stigma of being well-known for “no service” or “bad service”. It’s gotten to the point that bad service is almost expected, and any great service constitutes a pleasant surprise for the customers. It’s time to change, and it’s very easy to change.

What to do: Pay attention to your front of the house staff’s performance, then provide detailed training for new employees as well as regular refresher for existing employees.

Pho restaurant is dirty and looks run down. Okay, here’s another one. Vietnamese restaurants are known for being not very well kept, and for having dirty restrooms. Just as in number 2. above, younger generation restaurant operators are making positive changes, but by and large, Vietnamese restaurants are still well-known for not keeping things up to par. Dirty restrooms aside, I’d also worry about sanitation in the kitchen and related food safety issues.

What to do: This one is pretty easy: spend proper time to keep your business clean. A good point to start is creating checklists and assign rotating responsibilities to your staff. Make sure you include training on the importance of both food safety and proper sanitation techniques.

You let your chef run your pho restaurant. Here’s something a typical customer may not know: unless the owner is also the chef, many pho restaurants are at the mercy of the hired chef. It’s never a good situation, but it happens more often than I can count. For some reason, pho restaurant owners think it doesn’t happen to them, or maybe the problem will resolve on its own over time. The fact is, owners just hire a chef and let him/her run the kitchen with no guidelines, no policies, no disciplines. Bad.

What to do: This one depends a lot on a strong owner. Let’s face it, if you can’t control your chef, then your pho restaurant won’t have a chance of surviving. Here’s what you do: first write down what your policies for both food quality and staff conduct are, then make sure everyone is trained and understand your policies. Finally, prepare yourself to replace those who don’t follow the rules.

You’re not familiar with your numbers. Another behind the scene item not visible to the public, but may be one of the most important things, if not the most important thing, for any restaurant. Restaurateurs must know their numbers. I’m talking sales, fixed and variable costs, and other expenses to sufficient details in order to understand, monitor, and improve their operation. In a foodservice business, everything is inter-related, and the more detailed numbers is known, the better and more effective management of the restaurant can be carried out.

What to do: Work with your accountant to set up the books for regular and quick reviews of your restaurant’s numbers. Initially, you must be able to review your numbers at anytime (hourly, daily, etc.) Once you’re familiar with the process, you can do a weekly review. In my opinion, if your restaurant is important to you, then you’ll want to know your number by the hour, at least in the beginning. Your ability to collect data mentioned here is closely related to your point of sale (POS) and its ability to store information. It may be time to review what’s out there in the POS world.

In summary, customer demands evolve fast these days. For a pho restaurateur, this means making improvements to meet new customer demands and expectations. It also means doing what your customers like, not what you as an owner likes. In order to evolve, the pho restaurant owner needs to first accept that he/she needs to evolve, and then chart the path of change to serve the paying customers. Making the changes are actually pretty easy. The accepting to make the change is the hardest part.

So what’s your opinion as a customer who love to frequent a local pho joint? And if you’re a pho restaurant owner, what’s your viewpoint?

Share with us in the comments below.

For valuable tips and advice, read the complete series on how to open your own pho restaurant:

This is part 3 of a 3-part series on pho restaurant business plan. Click to read Part 1 and Part 2.

In Pho Restaurant Business Plan Part 1, we discussed why a business plan is important. In Pho Restaurant Business Plan Part 2, we discussed what important content should be included in the business plan. In this Part 3 of the series, we’ll dig a little deeper to see how you can develop the content for a pho restaurant business plan and its pro forma.

The key thing to remember is, a pho restaurant business plan is a living document, and no one is expected to complete it overnight. It should be updated as you continue developing and building your new pho restaurant. Here’s how you get it done.

Generating A Good Pho Restaurant Business Plan

I’ve run into many aspiring pho restaurateurs whose plan is: opening a pho restaurant, selling pho and making money. That’s the extent of the plan. The rest is make it up as you go.

Well, this is the recipe for failure. Maybe there are a few who succeed by riding on no particular plan whatsoever, but these are cases of freaky luck which you cannot count on all the time. There is a better way. You want to do the following.

Company Profile In Less Than 30 Minutes

Creating a restaurant means you’re actually creating a company that employs people to serve the public. The process of creating a good restaurant starts with your understanding of what your company provides, how it will provide it, and for what cost.

As a start, just quickly write down what you think your pho restaurant aims to do. Don’t worry about perfect grammar or readability at this point. The goal here is to jot down and have in writing whatever is in your mind, what you might have envisioned for the restaurant. You can always come back over time and improve on it later on.

Many people give the excuse that “I can’t write well” or such nonsense. Of course anyone can write. But you’re not writing a novel. You’re just starting a draft. I guarantee you that after the initial trepidation, it’ll be much easier to come back to improve it later.

At this stage, I recommend bulleted list. It’s very easy to do, it uses short phrases, and it’s fast. Here’s an example:

We treat our customers like neighbors and service them with care and respects.

There’s your vision. And that took less than 5 minutes, right?

As you continue developing your menu and other aspects of your pho restaurant over the upcoming days and months or even years, your company/restaurant will continue to develop and you’ll be able to come back and update your vision even more. I guarantee you that your vision will also become clearer and clearer.

Now that you’re got your vision down, let’s take another few minutes to also say something about your mission, goals and objectives, such as

“I want to serve the best Vietnamese pho food in the neighborhood” or

“I want to operate this first store and maximize its profits as quickly as possible before opening a second store within 2 years” or

“I want to serve the best pho within a 3 mile radius.”

I’m sure yo have your own mission. Just keep going. You’ll come back and update them later. And while you’re on a roll, go ahead and say something about other parts of your plan, such as:

Your management team (owner/operator, general manager, front and back staffing and management, chefs, cooks, servers, etc.)

Done. You can pick it up again later to flesh things out even more. Let’s move on to market research, sales and marketing, and operation.

Market Research, Sales and Marketing, and Operation

For each of these areas, just start the same way. Start with a few bullet points about what you think you want to do in each area. If you have more than a few bullet points for any area, then even better. It shows you have thought about it much more than you’ve given yourself credit for.

My experience is, people have a lot of good thoughts and ideas in their heads, but they’re too lazy to write them down. With the method I’m describing, you can quickly get them off your mind and create a written record for them. In doing so, you have the start of a business plan, while freeing up your mind to figure out other aspects of your business.

Start with something you already know, or maybe with some quick online searches to verify a few numbers and facts. Your market research may start with something like this:

There are 5000 homes (and families and schools) within a 5 miles radius of your potential location.

There’s a large hospital, factory, big company, etc. within 2 miles of your location that employs a large workforce.

There are well-known hotels or attractions in the area that serve as destinations for out-of-town business/vacationing visitors.

Your sales and marketing may start with these:

My menu items will be competitive priced in the local market, with a regular pho bowl priced at $7 and large at $8.

My marketing strategy will follow both traditional and online campaigns. Traditional marketing includes direct mailers sent to local addresses in the area, printed advertising and 4-wall marketing. Online marketing includes social media channels, local search engine optimization and other digital marketing methods.

Customers will be impressed by my staff’s dedicated and friendly service.

Your operation should at least discuss some of the following:

My plan to keep food cost low and food quality high includes strict inventory control and maintaining multiple suppliers.

My staff will be trained to follow important food safety guidelines at all times, and will be given regular refresher seminars to keep food safety on top of mind.

My menu will be designed for easy selection and quick ordering by the customers.

You get the idea, right?

As you continue, you can do additional research or data gathering to better define your market and positioning. You may also deploy a few unconventional techniques to really understand your market, competitors, and customer. I’ve employed many of these techniques, including parking myself outside of a competing restaurant to count people walking in their doors during lunch and dinner times. You’ll be surprised what you can learn. If you really want to do this, there’s always a way.

Generating A Good Pro Forma For A Pho Restaurant

A good business plan is incomplete without the financials, or as bankers and investors call it, the pro forma. Finance is not strong area for many people, and diving directly into one is not recommended without knowing the basics. So let’s go over some basics of the pro forma.

A pro forma can be just a spreadsheet consisting of a set of input parameters and assumptions that will give you meaningful output based on those assumptions and calculations. In other words, the pro forma is used to show the projected performance (sales, costs, profits, breakeven points, etc.) of your new pho restaurant. It is your total restaurant in operation, all on a spreadsheet. It can tell you, if you do this certain thing, then you will get that certain result. Pretty neat and powerful.

Below are descriptions of the input and output parameters.

Input Parameters

Assumptions. These are numbers reflecting specifically what your pho restaurant will be required to operate. The assumed parameters range from food costs and management salaries, to employee benefits and direct operating costs, to marketing and utilities expenses, to variable costs such as occupancy (lease), credit card charges and payroll processing. They are called assumptions because they are what you think you will spend when your new pho restaurant is in operation. Since you are yet to open, they are not actuals, they are assumptions.

Capital Budget. These are costs that represent your project cost leading up to grand opening. The capital budget is essentially your budget to build the project. It includes improvement to the location (whether leased or purchased;) kitchen equipment; design, consulting and other professional services; pre-opening expenses; and contingency capital. This is your investment to open the pho restaurant.

Sales Projection. On a monthly basis, the sales projection represents your sales for each day of the week based on the number of covers per day and the sales amount per cover. Of course since you haven’t opened yet, the numbers in this section are guesses. But with a little extra effort, one can get a fairly accurate weekly sales projection for your new business.

Hourly Labor. A pho restaurant will employ a number of hourly staff members. Their labor costs are estimated in this section. In order to accurately arrive at labor costs, the section considers individual positions within the restaurant, each with its own pay rate. Then together with assumed numbers of hours per position required to cook and serve the restaurant’s menu to projected customer counts, hourly labor costs can be calculated.

Output and Results

P&L Projection. From the input parameters just discussed, detailed profits and loss (P&L) statements can be calculated for the first year and subsequent years (normally 3 or 5 year projection.)

Breakeven Points. Also based on the same assumptions and projections, breakeven points can also be calculated for the initial investment, meaning, how fast an investment is expected to be recouped. Furthermore, daily/monthly breakeven sales can also be calculated to serve as daily/monthly targets to reached by the business to ensure profitability.

As yo can see, both the business plan and pro forma serve a very important role in your venture, even before you open for pho restaurant business.

Final Thoughts

The business plan, once set up, is the roadmap for your business. If you don’t have one, then you don’t have a roadmap for your business. Once created, you will want to refer to it often in order to stay on track, and update it to adapt to changing market conditions.

The pro forma, on the other hand, is a tool that you probably want to use everyday, especially before opening. Once set up, you can keep updating it with more realistic pre-opening costs, and you can use it to vary all kinds of parameters (such as manager salaries or utility costs) to investigate different market scenarios. This will help you make important strategic decisions based on those results.

So there you have it, the foundation to opening your own pho restaurant. It can be a lot of work but then no one says opening a restaurant is ever easy. Remember, if you haven’t been in the foodservice business, what you see when going out to a restaurant is only about 10% of what’s really going on behind the scene. There are much more going on that you don’t see.

If someone tells you he didn’t do any of these things and still become successful with his pho restaurant, then he either is extremely lucky or is not telling the whole truth. Many people often depend on luck and that’s fine for them. For most everyone else, I would highly recommend doing your business plan and pro forma in order to increase or even to create your own good luck.

If a lot of this seems too overwhelming for you, drop me a note using the pho consultation inquiry form and I will help with your business plan and pro forma. I can also make available a pro forma template for you to use.

Please leave your feedback in the comments below and let me know what you think.

For valuable tips and advice, read the complete series on how to open your own pho restaurant:

This is Part 2 of a 3-part series on pho restaurant business plan. Click to read Part 1 and look out for Part 3 in the coming days.

In Pho Restaurant Business Plan, Part 1, I discussed what a pho restaurant business plan is and why an aspiring pho restaurateur needs one. In this post, I’ll provide some guidelines to help you develop a solid pho restaurant business plan and pro forma yourself.

The point of all this business plan talk is to lay down the blueprint for you and your team to follow in building your new pho restaurant. But while it serves as the roadmap for you, it plays a much bigger role for your business.

If you are applying for a loan from a bank or have investors involved in funding your business, then a good business plan and pro forma are pretty much required. If you will have other people involved in carrying out the mission of your business, then a business plan and pro forma will help you stay on course to communicate to your team the company value, goals, visions, and track their performance in meeting those objectives.

So here we go.

Company Profile

This is the place you start to create your company, or your restaurant.

Take some time to really create your company. By this I don’t mean filling out the paperwork and submitting for licenses, etc. Those are the easy stuff and you do them anyway.

I’m talking about taking the time to really think about what your business is all about. Then describe it in words, including the value proposition you want to give customers, and the products and services you provide.

Additionally, you also want to write down your plan for management, location, legal structure of your restaurant. And last but not least, you should also define the vision, mission, goals and objectives that you envision for your business.

Market Research

Knowing the market is one of the most important aspects of successfully running a pho restaurant, or any restaurant for that matter.

You should write down what you understand to be your local market and all the dynamics that happen within it. This includes knowing your competitors (not just other pho restaurants but any other foodservice businesses that have paying customers similar to yours.) You should also want to understand your local market and demographics, know what your keys to success are, and clearly know your weak points.

To help with this process, you should perform a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, Threats. In a nutshell, Strength and Weaknesses refer to your internal operation, things that you have control over. Once identified, you should discuss how you will use your strengths and mitigate weaknesses. Conversely, Opportunities and Threats are external to your business, and refer to things that are outside of your control. Once identified, you should find ways to take advantages of opportunities and deal with threats.

Once you’ve gone through a SWOT analysis, you’ll be amazed how the SWOT analysis can clearly show you how you can compete and make profits in the competitive foodservice business.

Sales and Marketing

Your pho restaurant business cannot survive without customers knowing about you or finding you.

This is the reason why you should allocate a strong effort to sales and marketing. Effort may include time or money or both. At the very least, you want to create your pricing strategy (e.g., how and why your menu items are priced;) define your marketing strategy, activities and objectives; write a positioning statement to describe how you position your pho restaurant in the local market; and discuss the sales process to show you understand each and every sales step from acquiring a customer through getting paid by that same customer.

Lastly, despite being in a competitive market, no one ever operates in a vacuum. For this reason, you want to also discuss any alliance with other businesses or organizations to both parties’ mutual benefits.

Operations

This is the area that takes all your ideas, plans and projection and make them happen.

You want to show that you understand why you select/prefer a certain location for your pho restaurant; you understand the legal, risk/insurance and other business issues associated with running your business; you have a solid plan to solve your human resources issues; and you have at least thought about, if not figured out, the process and production steps to serve the items you have on your menu.

The process and production itself includes at least 3 very important components: the menu, the sale process and customer service, and food preparation and production. Spend sometime and think about what you’ll do in each area and how you’ll do it. It’s better to give some serious thoughts to this at this early stage, and then modify as you go, instead of later just making things up as you go.

Financials or Pro Forma

Almost all businesses are run by money and for money, and pho restaurants are no exception.

You can’t hide from the numbers. You have to know your numbers, and the best time to learn your numbers is before you start. You want to spend some time understanding and making projection about your start-up costs, and then estimating your break-even points. Additionally, you want to make sales forecasts based on assumptions that can be updated over time, so that you’ll know all causes and effects that influence how your pho restaurant will perform. Typically, you want to do 3- or 5-year forecasts so that your cash flow situation is well understood.

Initial setting up of this system can be tedious, but once done, you’ll have a template that can be used to assess multitude of business situations for your pho restaurant.

Putting It All Together

As you can see, both the business plan and pro forma serve as a critical tool to run your new pho restaurant successfully. They force you to look at all important aspects of your pho restaurant during the early stage of development, and to work out some solutions before you spend a dime on purchasing services and hardware. They will keep you on track with your restaurant development.

In Part 3 of this series, I’ll share the steps you can follow to create your own effective business plan and pro forma that will successfully communicate your pho restaurant concept, your visions, and the marketing and operation that support them.

]]>http://www.lovingpho.com/vietnamese-pho-restaurants/pho-restaurant-business-plan-part-2-whats-sexy-about-it/feed/2http://www.lovingpho.com/vietnamese-pho-restaurants/pho-restaurant-business-plan-part-2-whats-sexy-about-it/Pho Restaurant Business Plan, Part 1: What Is It Anyway?http://feedproxy.google.com/~r/LovingPho/~3/JilJIAsD7rU/
http://www.lovingpho.com/vietnamese-pho-restaurants/pho-restaurant-business-plan-part-1-what-is-it/#commentsFri, 30 Jan 2015 22:45:30 +0000http://www.lovingpho.com/?p=2140

This is Part 1 of a 3-part series on pho restaurant business plan. Read Part 2 and look out for Part 3 in the coming days.

Here’s a question for the aspiring entrepreneurs who dream of opening your own pho restaurants:

Do you have a pho restaurant business plan?

It’s very important that you have one, or create one, before doing anything else.

As I’ve mentioned in a few other articles on how to open a pho restaurant, a business plan is one of the most critical things you can do to start up on the right path. With it you can see the right action to take at every turn. Without it you might as well take your money to Las Vegas because you’d have a much better time there.

All joking aside, I get important questions like these all the time:

How much does it cost to open my pho restaurant?

How do I find and hire a pho chef?

How do I make good pho?

How do I know food and labor cost?

etc.

For the serious entrepreneurs, you’d be surprised how many of these questions can be answered by developing your own business plan and the associated financial statement projection called the pro forma.

In fact, there are questions that can ONLY be answered by the business plan and the pro forma. But first, what is a business plan anyway?

A Pho Restaurant Business Plan Is…

Many people have a negative knee-jerk reaction when hearing the word business plan. Regardless of how they think about it, here’s a definition that’s easy to understand:

A business plan is a document that tells the reader about your restaurant concept and idea. It tells what you’re trying to do, why you’re approaching it the way you do, how you are going to achieve it, who will be responsible for carrying out the operation, and when will things happen.

If you are about to spend a lot of money on a pho restaurant venture, then it makes sense to know what you really need to do, down to the level of detail that will help you do it efficiently and properly.

As you can see, the business plan for your pho restaurant should touch on all the major areas of running the business. As you work on developing the plan, you’ll begin to gain important insights into what you want to do versus what you need to do, which will help you create a plan to do them.

Obviously, things change as time progresses. Therefore, your business plan is a living document that you update regularly as you head down the path to build your pho restaurant.

A Pro Forma Is…

Still even more people have no concept of what a pro forma is.

This is essentially a financial statement that projects your pho restaurant performance into the future, and provides data for many parts in your pho restaurant business plan. Typical sections in the business plan that use the pro forma information include sections discussing startup costs, labor costs, revenue projection, and break-even points. The pro forma also supplies Profit and Loss (P & L) and cash flow statements projection.

Despite what many people may think, foodservice is just like any other businesses. It’s all about the numbers. As an aspiring pho restaurateur, train yourself to be comfortable with working with your business’ numbers and you’ll be way ahead before you open for business.

Putting It All Together

Note that the pro forma is required whether you get a bank loan or private investment. Those who want to help fund your project really care to know that you have the knowledge and understanding to run your own business.

Even if you can fund your project yourself, you still should do a pro forma regardless, because you yourself should care about your money more than the banker or the investor.

Don’t shortchange yourself by skipping this step. If you don’t have the desire to do a business plan and pro forma for your business, then maybe you don’t have the discipline to successfully run the business itself after you open it, assuming you get past the grand opening.

In Part 2 of this series, I’ll discuss in detail what are all included in an effective business plan and pro forma.

Here’s Lovingpho’s own beef pho recipe in infographic form. This beef pho recipe yields about 20 quarts, which is about 20 regular size bowls you can typically get at most pho restaurants. With this size, you can make it once, enjoy it, and have plenty of leftover to freeze for quick pho anytime later.

It’s quite easy to scale up or down depending on your desired size. Just do straight linear scaling and you can’t go wrong. Of course, you can adjust any element to customize to your own taste. Let me know what you think, and leave a comment below.

Life is full of tough choices. For me, the choices are between pho, hu tieu and bun bo Hue.

Pho is of course my favorite (why would I have created lovingpho.com in the first place?) But as it turns out, I love hu tieu and bun bo Hue just the same.

No I’m not abandoning pho and lovingpho.com. It’s just that these other 2 impressive noodle dishes also represent Vietnam very well. And interestingly, it should be this way.

Pho is northern Vietnam food, hu tieu originates in the south, and bun bo Hue is of course from central Vietnam. Maybe my love for the motherland is subconsciously coming out through the love for pho, hu tieu and bun bo Hue, I don’t know.

As a side note, despite what you may have read from writers who declared that pho is the national dish of Vietnam, sadly it is really not. It just became more popular outside of Vietnam beginning in late 80’s and the 90’s because it was easier to understand and be enjoyed by non-Vietnamese. Fast forward to 2015 and pho is standing proud and strong with mass appeal, but both hu tieu and bun bo Hue are gaining traction as people continue to look for varieties.

By the way, if Vietnam must have a national dish, then I think we should start with the rice cake bánh chưng as the first choice, then let the debate go from there.

I did a poll on pho and hu tieu. If you haven’t taken it, please add your vote.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

And here’s a new poll for pho, hu tieu and bun bo Hue.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

So this is my dilemma. What’s yours? Share your thoughts in the comments section below.

Updated 03-15-15. Let’s take a look at what may constitute a pho secret ingredient.

Pho is as much about tradition as it is about adaptation. At the adaptation end, when you have something as good and as easily customizable as pho, you can’t stop people from messing around with it. And they do. That’s the “fusion” extreme of pho and I’ve seen and heard all kinds of ingredients thrown in the pot in the name of creating better pho.

The Regular Cast

At the more traditional end of pho, a good pho broth should have a certain number of main ingredients that make up its unique fragrance and taste, making pho… well, pho. People don’t deviate too much from the star anise and cinnamon spices, the charred ginger and onion, the low and proper simmering of beef bones, and the fish sauce. We Vietnamese love our fish sauce which itself is a flavor enhancer, so we use it everywhere and pho is no exception.

And what about MSG? Regardless of your personal view on this versatile ingredient, MSG is also a flavor enhancer, and it is cheaper than fish sauce. So sure, there are more than a few pho chefs who use it quite generously. Used in correct amounts, MSG can do great things for a pho chef.

The “Secret” Ingredients

Beyond these, there are other ways to add flavors to pho. These are actually well-known ingredients or techniques in Vietnamese cooking, especially those used in many Vietnamese soups called “canh” that accommodate the typical Vietnamese meals.

There’s Vietnamese dried shrimp (tôm khô) and Vietnamese dried squid (mực khô). Both of these ingredients can be used to impart the umami taste and enhance flavors in any dish. Normally only a handful amount is needed and the nice thing is your dish does not come out tasting fishy at all. The resulting flavor of the dish is 10 times better than without it.

The dried shrimp is more commonly used due to its lower cost, and both dried shrimp and dried squid can also be enjoyed as snacks by many people as well. By the way, tôm khô should not be confused with “tôm kho” which is the delicious shrimp with shell on (most of the time) simmered in caramel sauce and served over steam rice.

Beyond the dried shrimp and squid, daikon or various other types of radishes and vegetables can also be used. The chayote (su su in Vietnamese,) cabbage, and the reliable carrots can also add flavors. However, daikon, cabbage and chayote are more popular because they don’t tend to overwhelm the taste of the pho broth like carrots do. Again these are meant to be flavor enhancing agents and their use should be regulated. Remember, you are making pho, not any soup.

Create Your Own Pho Secret Ingredients

In the end, I think the best and most reliable secret ingredient for pho should already be in a typical pho recipe. Beyond using the proper amount of spices and flavoring with good techniques, the best assurance of a good pho broth is using the right amount of beef bones, maybe adding oxtails, plus using the right amount of time and technique to make the broth.

Successful restaurants who’ve been in business for a long time and serving a large client base know the right combination, proportion and technique required by a classical/traditional pho recipe, and that is their secret. They may add something here and there to personalize their broth, but that’s not as important as mastering the consistency that makes their pho great.

When you visit pho restaurants, you do taste variations in the broth from one pho restaurant to the next, but they all have to keep their pho on a straight and narrow path to ensure quality and consistency, while keeping cost at an acceptable level.

I’ve done all the things mentioned above and the results are all excellent. But not all are appropriate to serve to the mass. Personally, I’d like to stay with the classic, however, and spending the time to perfect my techniques.

As a home cook, cost is not much of a concern so you may try a few of these yourself. You may also experiment with some other ingredients if you wish and see what works for you and decide what deserves a permanent place in your recipe.

As an aspiring restaurateur looking for something to differentiate yourself, my advice is to get your technique down with the classic pho. After that you can do whatever you wish. You’ll be surprised how much people will appreciate a bowl of classic pho done right, and there’s no need to look for any secret. The secret is already right there in your kitchen.

So in the end, the secret is there’s no secret? What a letdown right? The message I’m trying to get across is there’s no quick fix for good pho. Like in other endeavors worth pursuing, you’ll just have to respect what you do and master it yourselves.

Here’s chef Charles Phan in an interview with The Splendid Table’s Lynne Rossetto Kasperon on “The secret to real pho is the stock.” You can also listen to the interview below.

Have a pho secret? Share with me, will you?

For valuable tips and advice, read the complete series on how to open your own pho restaurant:

As I advice others on how to open and operate their own pho restaurants, a common pho question always come up searching for a good answer. Seeing that it can result in much confusion or misunderstanding, I want to put this out to share my views on this.

The question I get very often is: what is real, authentic pho and how do I make it?

First a bit of background. I’m not going to go into the whole history of pho here. For that, you can read about The History and Evolution of Pho. For the purpose of this post, the important event was 1975, the end of the Vietnam war, when large number of refugees left the country to settle mostly the U.S., Canada, Australia and some European destinations. At the time, pho was already regional in Vietnam. There was a Northern pho version and there was a Southern pho version which are essentially Hanoi/Nam Dinh pho style and Saigon pho style, respectively. Of course the 2 styles exist today and thriving. They have the same or similar basic ingredients with some variations in ingredients and cooking method/process depending on the region.

The Pho Confusion

Well, 1975 happened, and today, pho is pretty much global. It can be found in all corners of the globe. Many people, especially non-Vietnamese, have an opportunity to taste a wide variety of pho during their travel to different places, and more importantly, a lot more freely in Hanoi and North Vietnam. As a result, pho Hanoi is becoming more known and unavoidably is thrown into the mix and discussion of what is real or authentic pho.

I should point out that, pho should not vary widely from place to to place. Good pho should follow a fairly narrow band that defines pho as pho. Anything outside of that band, we already have a name for it, as exemplified by the excellent tasting and awesome hủ tiếu, which does allow for wide regional variations.

So, a few people from mainland China and elsewhere asked me that they want to make authentic pho like being served in California, not in Hanoi or Saigon. A few others mentioned that they like to serve the more “authentic” version with jalapeño as used in North America as opposed to the Thai chili pepper they have in their country.

Wow, what a mess of confusion, wouldn’t you say?

I always take the time to explain the difference and what is what and where is why. The risk of being a culinary dish becoming well-known globally in such a short explosive time is to create a mess of confusion. Today people can get pho almost anywhere and some reality is lost not just in the thick of it, but also from a few liberal local pho restaurateurs claiming they serve authentic pho. For those who live near a Vietnamese community in the U.S., Canada, Australia or Europe, or were introduced to pho in these places, it is the Vietnamese pho they know as the real pho, and everything else is compared to it.

The answer of what is real, authentic pho is even more elusive.

Is Global Pho Vietnamese Food Anymore? Well… Yes and No

As in many things in life, we develop personal preferences, habits, or even a biases, for a particular food we grow up with. Pho is no exception, even for young Americans these days.

Due to events in 1975, a period of more than 39 years as of 2014, we now have pho outside of Vietnam that has really morphed into something based more on available regional ingredients and taste. For example, the pho you find in North America today originated from almost 100% of the Saigon style brought over to the states from 1975 and after. Over 40 years, it continues to change to fit customer demands and new ingredients; witness the reduced fat and MSG use in the broth, the addition seafood pho, the expansion of vegan pho, and wagyu and even Kobe beef. For many pho lovers, there’s a real difference in pho in San Jose CA compared to pho served in Little Saigon down in SoCal, and there are fans who will pledge allegiance to either.

During this same 40-year time period, pho within Vietnam continues on its own development path with new younger generation of pho operators, with changing local tastes, and with foreign visitors. Plus there are expatriates coming back to open pho businesses, taking with them Western influences in ingredients and cooking methods. Add to all of this the Northern style and Saigon style pho that are intrinsic to each region in Vietnam, and you can see we have pho going in many directions.

Food and tastes change over time. Pho is no exception.

The Question Remains: What’s Real and Authentic Pho?

There is no definitive answer to the question, and I think I’ll leave the academic aspect of this debate to the scholars. For me, I have the following thoughts:

If you really want to be correct about it, there is no real, authentic pho except for what’s officially defined by a respected and authoritative body as the real, authentic version in both historical and traditional senses. Unfortunately, this body doesn’t exist at least for the foreseeable future.

Alternatively, maybe we can define real pho as pho made by a Vietnamese person, or pho made in Vietnam, or pho made by a Vietnamese in Vietnam. Sounds somewhat reasonable, but for me this may be true back around 1975 or even the early 1980’s and is no longer true now.

In the end, I want to enjoy good pho, the kind that I know “tastes right in all aspects” and gives me the “experience that I expect.” This, I define as pho that

Possesses all things that convey the Vietnamese-ness of the dish, including all the basic characteristics in ingredients, preparation, and service of what is known traditionally as pho, with clear tasty broth produced with care using the proper spices, VERY fresh ingredients and herbs, properly served rice noodle, and correct combination of garnishes, AND

Is instantly recognizable as pho in both look and taste by the majority of people who normally consume pho, AND

Is enjoyed by a large number of people who are willing to pay for it within the same local area.

This is my strict definition of what real, authentic pho is. It takes into account important elements that, when combined together, contribute to the awesomeness of real, authentic pho. It also takes into account consideration of changing market and environment and time and place.

If you don’t have all 3 of these characteristics, then I would say you don’t have real, authentic pho. If you have an empty pho restaurant, then you don’t serve real, authentic pho. And it’s really meaningless to claim that you serve real, authentic pho from family recipe without all 3 characteristics above. A restaurant may serve good pho, but without all three, it’s not real, authentic pho. It’s just good pho.

So what do you think? What’s your view of real, authentic pho? Please share your opinion in the comments below.

For valuable tips and advice, read the complete series on how to open your own pho restaurant: